Huge Freddie Mac "Related Person" Update Just Made Buying a Home Easier!
Freddie Mac recently announced a significant update to its credit underwriting guidelines. The update changes their "Related Person" definition to include "unrelated individuals with close, family-like ties to the borrower."
This change has several positive implications for borrowers. Most notably, it broadens the pool of eligible donors who can provide gifts of funds or equity for a down payment, making securing a mortgage and purchasing a home easier!
Gift funds have always been a popular source of down payment money, but in the past, they had to be sourced from a relative. With this change, borrowers can now use gift money from sources other than immediate family, which could make it easier to find the funds needed for a down payment and closing costs.
This change also gives more flexibility to other Freddie Mac credit underwriting requirements.
"We believe that homeownership is an essential part of the American dream, and we are committed to doing everything we can to help more people achieve that dream," said Freddie Mac's spokesperson. "By expanding our definition of 'Related Person,' we are taking a significant step [toward] that goal. This change will have a positive impact on the housing market and will help more people become homeowners."
Additionally, other positive changes were recently announced on the housing front.
FHA To Reduce Insurance Premium Beginning March 20, 2023.
The FHA will reduce its mortgage insurance premium by 0.30 percentage points, from 0.85% to 0.55% for most first-time homebuyers. This reduction will help make homeownership more accessible and affordable.
VA Funding Fee Reduced For Loans Closing On or After April 7, 2023.
The VA is reducing the funding fee for purchase loans, construction loans, and cash-out refinance transactions by 15 bps, effective for loans closed after April 7, 2023. Those using their VA benefits a second time to purchase or construct a property with less than a 5% down payment can also benefit from a fee reduction.